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2012-07-31
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IAEAInternational Atomic Energy Agency
Economic Indicatorsto Assess Benefits from Cooperation
Among CountriesFerenc L. Toth
Planning & Economic Studies Section (PESS)
Department of Nuclear EnergyINPRO Dialogue Forum
“Drivers and Impediments for Regional Cooperation
on the Way to Sustainable Nuclear Energy Systems”
VIC, Vienna, Austria, July 30 – August 3, 2012
2
Overview
Preamble: PESS and its mandate
1. Context: Innovation and economics
2. Indicators of creation of new knowledge
3. Deployment: barriers and remedies
4. Summary and conclusions
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Preamble: PESS and its mandate
DDG-NE: Planning and Economic Studies Section
1) Planning and Capacity Building Unit
Develop & disseminate models, train experts, apply in TC on national energy strategies; INIG: Pre-feasibility
2) 3E Analysis Unit (Energy-economy-environment)
- Technoeconomic analyses- Geologiocal disposal of RW and CO2: workshop, book, CRP- CC and energy systems: same- NP - sustainable development- Life cycle emissions (CO2/GHG)
4
Preamble: PESS and its mandate
2) 3E Analysis Unit (Energy-economy-environment)
- Sustainable energy
development- CC and Nuclear Power: Annual- Indicators for NE Development (INED)- Book: Energy for Development
IAEA Scientific Forum- UN & others: IPCC LAs in WGII, WGIII AR4, AR5, SREX - UN CSD: Rio+20 Conference
2012-07-31
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1. Context: Innovation and economics
Schumpeter:
Invention: new idea:
science – basic research – public good – public finance
Innovation: marketable products/processes:
applied science – targeted research – private good (patents) – private finance
Diffusion: spread across markets impact on economy and society
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1. Context: Innovation and economics
Stages in technological R&D&D&D
to Commercial Utilization:
Basic research: discoveries (materials sci, chemistry,)
Applied research: inventions, improvements
Development: producing working prototype
Demonstration: testing, scaling up, proving feasibility
< “valley of death” >
Deployment: implementation in pre-commercial stage
Commercial utilization: widespread use, diffusion
Reality: overlaps, iterations, feedbacks between stages6
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1. Context: Innovation and economics
Nuclear industry – current challenges:
- Operation safety
- Waste disposal – resource use
- Proliferation, diversion of N material
- Costs, competitiveness
Public acceptance
Globally shared concerns
– global cooperation to find solutions
AND: Globally shared opportunities:
need for low-C tech, supply security, price stability, etc.7
1. Context: Innovation and economics
R&D stage Type of TDBasic research science-driven innovationApplied research science-driven + ITCDevelopment induced technology changeDemonstration induced technology changeDeployment: learning by doing, some ITCCommercial utilization LbDLbD: learning/experience curves, cost-free < happens>ITC: triggered by relative prices (direct/indirect); requires
investments (costs); knowledge capital explicit/tacit; <pulled>funds largely private sources, depends on appropriability
SDI/TC: generated by public S&T policy <pushed>fostered by public R&D funding, creating public good
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1. Context: Innovation and economics
Point #1:
Generic patters of technological R&D cycle
need to be adopted to special features of SNES
Type of TD in R&D stages:
funding requirements: magnitude, source (priv/pub)
knowledge generated: public or proprietary
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2. Indicators of creation of new knowlege
SNES: NPR and NFS – develop simple models and indicators
Here example:
Indicators Based on Creation of New Knowledge
Input and Output
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2. Indicators of creation of new knowledge
[CRE-I1] (inputs) intramural R&D expenditures by sector of performance, by source of funds, and by type of R&D
[CRE-I2] (inputs) extramural R&D expenditures
[CRE-I3] (inputs) government funded R&D expenditures
[CRE-I4] (inputs) the number of R&D researchers and technicians in the field
[CRE-I5] (inputs) number of research-purpose reactorsbeing used
[CRE-O1] (outputs) number of scientific publications in field
[CRE-O2] (outputs) number of patent in the field
2. Indicators of creation of new knowledgeCRE-I3: Gov’t-funded R&D on nuclear fission
0
0.5
1
1.5
2
2.5
3
3.5
4
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
bill
ion
US
D P
PP
Canada
France
Japan
Korea
Sweden
United Kingdom
United States
IEA total
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2. Indicators of creation of new knowledgeCRE-I5: Number of research reactors used
USA
Russia
0
20
40
60
80
100
120
140
160
180
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
Canada
France
Japan
Korea
Sweden
UK
USA
Argentina
Brazil
China
India
Pakistan
Russia
S Africa
Canada
France
Japan
UK
ArgentinaChina India
0
5
10
15
20
25
30
35
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
Canada
France
Japan
Korea
Sweden
UK
Argentina
Brazil
China
India
Pakistan
S Africa
2. Indicators of creation of new knowledgeCRE-O1: Scientific publications in nuclear power and associated fuel cycle field (1000s)
France
Japan
USA
Russia
USSR
0
1
2
3
4
5
6
7
8
9
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
.
Canada
France
Japan
Korea
Sweden
UK
USA
Argentina
Brazil
China
India
Pakistan
USSR/Russia
S Africa
Canada
France
Korea
UK
ChinaIndia
0
0.5
1
1.5
2
2.5
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
.
Canada
France
Korea
Sweden
UK
Argentina
Brazil
China
India
Pakistan
S Africa
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2. Indicators of creation of new knowledge
NP and FC: work in progress; so far: vast data problems (private)What are the meaningful input and output indicators?Obvious place to start: anything usable from ITC representation?Broader approach: R&D allocation for SD (N)energy innovationPortfolio models: for competing ideas/directions: IF reasonable
(gu)es(s)timates of funds needed, probability of success, time required, value of outcome
Game theory models: technologies, probabilities, payoffsEneTech models: hypothetical technologies total system cost;
many sensitivity runs + exog estimates of R&D investment needs identify promising directions
Real challenge: how to model discoveries and true inventions (no one knows today) – futures studies surprise methods?
2. Indicators of creation of new knowledge
Point #2: models of SD innovation are needed
Options to include results into general economic (CGE) or energy sector (PE) models: depend on model type & detail
Highly aggregated: one parameter or one equation
More detailed: reduced form representation of SDI model
Initially: improving existing parameters, adding new ones –exogenous (simple but does not account for costs)
Later: new equation, knowledge multiplier (more explicit but requires understanding of technology outcome: remote from SDI)
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3. Deployment: barriers and remedies
Recall: scheme of technological R&D&D&D to CA
Deployment: implementation in pre-commercial stage
Commercial utilization: widespread use, diffusion
Reality: overlaps, iterations, feedbacks between stages
Regional cooperation: in deployment and CA phases
closer look at deployment
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3. Deployment: barriers and remedies
Across stages of technology development process:
Funding: magnitude increases; Depl: jump, varies widely
Objectives: more focused; Depl: THE technology as demonstrated by the prototype
Sources: more concentrated; Depl: owners, later imitators
and: public-private shares shift towards private
Note: general patters, but: variations across technologies, exceptions, special cases
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3. Deployment: barriers and remedies
Deployment: beginning of commercial distribution
SNES demonstrated, potential for competitiveness promising but: barriers What is special about SNES?
General technology R&D outcomes:
reduce (priv) costs, increase quality of product/service
users adopt them when Bn/Cn > Bo/Co :colour tv, cell
SNES: may or may not do the above, but:
- deliver public good (energy supply security)
- mitigate an externality (GHGs)
- other benefits, but: remote in time, magnitude of investmts
Barriers: analyze understand alleviate; not always $$
3. Deployment: barriers and remedies
Barrier 1: Cost
Problems: public-good features of SNESs not valued, externalities of competitors not penalized
Indicators: econ.value of supply security, soc.cost of C
Remedies: performance standards, portfolio requirement
Problems: early phase of the experience curve realistic expectations for cost reductions from LbD
Analytical tools: life cycle (S-curve) and learning curve use them as monitoring tools (not prediction tools)
Remedies: direct support, public procurement, technology transfer assistance
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3. Deployment: barriers and remedies
Life cycle (S-curve): penetration (volume, market share)
once new T starts picking up (annual increase in V or MS): start reducing direct support
Learning curve (experience): unit cost reduction per doubling cumulative production
once unit costs start approaching those of incumbent technologies start reducing direct support
In contrast: if no learning despite deployment (flat or sluggish learning curve) shift private investment and public support back to R&D: improve cost, performance
3. Deployment: barriers and remedies
Barrier 2: Market structure
Problems: monopolistic/oligopolistic market, entry barriers, inertia
Indicators: number of sellers (tech. owners/providers)
market shares of largest, 3-5 largest sellers (>50%?)
diversity index:
Shannon-Wiener Index (SWI):
Xi:the market share of supply source i
Remedies: direct intervention: market share targets; information to distributors and consumers;
go for niche markets
i
ii XXSWI ln
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3. Deployment: barriers and remedies
Barrier 3: Capital stock inertia
Problems: slow turnover of capital stock, old stock largely depreciated: MCo < MCn; more lucrative to refurbish old than to install new
Indicators: absolute/relative weighted average/mean age
(relative to econonomic/technical life)
performance (efficiency) weighted average age
Remedies: pre-announced dynamic performance standards: improve or retire;
direct subsidy for retirement of old capacities
Not clear how these would work for SNES
3. Deployment: barriers and remedies
Barrier 4: Infrastructure
Problems: incompatibility with existing storage, distribution, delivery equipment and networks, or: infrastructure does not exist
Indicators: ??
Remedies: direct public investment or indirect support to private investments to develop infrastructure;
ratio depends on public/private nature of T
Problems: special features of T; eg, release, proliferation
Remedies: R&D in SNES itself or infrastructure to handle special features
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3. Deployment: barriers and remedies
Barrier 5: Regulation
Problems:
inadequate/incompatible planning and licensing procedures, standards, etc.
Indicators: ??
Remedies:
regulatory innovation; updating standards
flexible and adaptive regulatory regimes
3. Deployment: barriers and remedies
Barrier 6: Public acceptance
Problems:
ignorance, outdated or spurious information, justified or unfounded fears, NIMBY
Indicators: self-reported knowledge, factual knowledge, public attitude, willingness to participate in DM
Remedies:
labeling, performance indicators, information provision, economic and social incentives for host regions
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3. Deployment: barriers and remedies
Barrier 7: Financing
Problems:
gap between economic and financial Cs/Bs of SNES
transaction costs: Ts delivered in smaller projects: transaction costs higher, but value at risk smaller
and: risks pooled from several projects lower premia
risks: T itself, costs, market, regulatory, public acceptance: diverse and different depending on T
Indicators: many; relevance/choice depends on context of application
Remedies: direct or indirect financial support; innovative FIN schemes, PPPs, venture capital
3. Deployment: barriers and remedies
Point #3: Importance of deployment: the probe of the pudding …from technical feasibility to economic viability to
commercial competitiveness but: if the probe fails, trouble may be elsewhere: barriersBarriers: often not cost or investor disinterest; 7 typesBarriers: more R&D may or may not help to alleviate
themProper ratios of R&D vs Deployment costs are difficult to
estimate: number and intensity of iterations across phases of the R&D cycle differ widely across technologies AND: cross-fertilization from other T:
e.g., isotopes
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3. Deployment: barriers and remedies
Point #3 cont:Precondition to deployment: solid demonstration units
(expensive and limited learning from units quasi-permanently down)
Potential pitfalls in deployment support:- too early provision: lock-in immature T, block more
promising ones- too early phase-out: drop a potentially useful T- too late phase-out:
IF T successful: distort market competitionIF T unsuccessful: throw good money after bad
- S-curves and learning curves: useful monitoring and assessment tools in balancing R&D vs deployment
4. Summary and conclusions
Nuclear industry: most interconnected globally
esp. negative events: anywhere impacts everywhere
Joint concerns: proliferation resistance to resource availability
Implication: combination of competition and cooperation
in innovation/R&D to operation (WANO)
and international organizations and projects:
IAEA, OECD NEA, GIF, many others
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4. Summary and conclusions
Costs and competition:
- with other resources/technologies: fossil, renewables
- among NP technologies: LWR vs FR now
increasing complementarity in the future (CFS FR)
Innovation: SNES concepts – need for basic research
public good, collaboration (free riders?)
Innovation: SNES designs – development & demo:
public good, collaboration (free riders?)
Innovation: SNES PPs – demonstration & deployment:
private good, competition 31
4. Summary and conclusions
Innovation in NE:
imperative: safety and proliferation resistance
necessary: economics and sustainability
Complex multi-attribute problem: all necessary
Economics of innovation: increase efficiency by
international cooperation in R&D&D&..?
32